Case Law & Practice Advice

There is a growing body of case law and practice advice to lawyers advocating the use of mediation and alternative methods of dispute resolution. Some of the more well known examples are cited below.

Halsey v Milton Keynes NHS Trust. (May 2004)

This decision establishes three principles which should be noted.

(i) "The value and importance of alternative dispute resolution (ADR) have been established within a remarkably short time. All members of the legal profession who conduct litigation should now routinely consider with their clients whether their disputes are suitable for ADR."

(ii) "The fundamental principle is that [a] departure [from the general rule that costs follow the event] is not justified unless it is shown (the burden being on the unsuccessful party) that the successful party acted unreasonably in refusing to agree to ADR."

(iii) "The fact that a party unreasonably believes that his case is watertight is no justification for refusing mediation. But the fact that a party reasonably believes he has a watertight case may well be a sufficient justification for a refusal to mediate."

Burchell v Bullard (2005 EWCA 358)

The Halsey case above has been to some extent misunderstood, particularly by parties who believed that their case was watertight. This issue has now been addressed by the Court of Appeal in Burchell. This case concerned a building dispute where the claim was for £18,300 and the counterclaim was for £100,000. In the event, the claimant was awarded his claim in full and the counterclaim succeeded only in the sum of £14,300, effectively a settlement of £5,000. The costs of both parties amounted to over £185,000 – a figure which Ward LJ described as “horrific”.

Ward LJ said in his judgment, “The defendants behaved unreasonably in believing, if they did, that their case was so watertight that they need not engage in attempts to settle…..The stated reason for refusing mediation, that the matter was too complex for mediation, is plain nonsense”. He went on to say, “Halsey has made plain not only the high rate of a successful outcome being achieved by mediation but also its established importance as a track to a just result running parallel with that of the court system”.

It is important to note, therefore, that the preference of the judiciary towards “mediation before litigation” continues. Each new step in the Court of Appeal suggests there is an increasing risk that a successful litigant may not obtain costs at trial if there is a refusal to mediate.

Some Examples of decisions on costs

McMillan Williams v Range

Court of Appeal: In this case an employee who received advance salary in excess of her actual earnings had to repay the excess to her employers when she left the firm. The court at first instance advised mediation, but both parties refused; the court ordered both parties to bear their own costs.

Dunnett v Railtrack 2002

Court of Appeal: Costs were denied to a successful party because it had earlier flatly refused to mediate. This case is seen as a benchmark towards the requirement to mediate and followed earlier cases warning of likely costs sanctions (see also Cowl v Plymouth City Council below).

SITA v Watson Wyatt and Maxwell Batley 2002

In this instance a successful litigation party refusing mediation escaped costs sanctions because the invitation to mediate was made at short notice in an effort to "dragoon, browbeat and bully" and in a way that was described as "disagreeable and off-putting".  Here the mediation proposal was seen as a litigation tactic rather than genuinely designed to seek settlement.

Cable & Wireless v IBM United Kingdom Ltd 2002

Here a Mediation clause was enforced by the court adjourning the litigation. The clause was not a mere agreement to negotiate and therefore unenforceable, but a real contractual commitment to find solutions "which are mutually commercially acceptable at the time of the mediation". Of particular note, Mediation is described as "a firmly established, significant and growing facet of English procedure".

Cowl v Plymouth City Council

Court of Appeal: The significant comments of the court in this case are as follows,

"Without the need for the vast costs which must have been incurred in this case….. the parties should have been able to come to a sensible conclusion as to how to dispose of the issues which divided them. If they could not do this without help, then an independent mediator should have been recruited to assist. That would have been a far cheaper course to adopt. Today, sufficient should be known about ADR to make the failure to adopt it, in particular where public money is involved, indefensible."

Lord Woolf makes it clear that Parties, not just limited to public bodies, who fail to consider alternative dispute resolution will be criticised by the court.

Practice Advice

The following Practice advice was issued jointly on 22 April 2005 by the Law Society's civil litigation committee and its alternative dispute resolution (ADR) committee:

The term ADR means both mediation and any other alternative to formal litigation or arbitration that might be an appropriate alternative means of resolving the dispute in the particular circumstances of the case. This might include expert evaluation, early neutral evaluation or conciliation, as well as mediation.

"This practice advice relates to the giving of information on mediation and other dispute resolution options to clients before, and during the process of resolving any disputes between the client and third parties. The principle of why this advice and information should be given is to be found in the dicta of Lord Justice Dyson in the case of Halsey v Milton Keynes NHS Trust and Steel v Joy [2004] EWCA 576:

"All members of the legal profession should now routinely consider with their clients whether their disputes are suitable for ADR"

The court has a duty to encourage parties to co-operate with each other in the conduct of the proceedings - Civil Procedure Rules 1998 (CPR), rule 1.4(a) - and to likewise encourage parties to use mediation or some other alternative dispute resolution technique in appropriate cases - CPR rule 1.4(d). Where the parties cannot agree to use mediation or another ADR process, the obligation is on the party wishing to use mediation or another process to say why it is appropriate in the circumstances. Section 2 of the guidance summarises the factors to consider in ascertaining whether a case is suitable for ADR.

This practice advice applies to advice and information at the appropriate time, which may be at the commencement of a dispute within the initial advice, or at any later stage of the dispute.

Practitioners should keep these options under review throughout the course of the matter and should,

• In appropriate cases, and at appropriate times, explain to clients whether there are ADR techniques that might be used other than litigation, arbitration or other formal processes; what those alternative processes involve, and whether they are suitable in the circumstances, and
• Keep the suitability of mediation and other ADR techniques under review during the case and advise clients accordingly.

In assessing whether a case is suitable for mediation or some other form of alternative dispute resolution, the following should be born in mind:

• The nature of the dispute
• The merits of the case
• The extent to which other settlement methods have been attempted
• Whether the costs of the ADR process would be disproportionately high
• Whether any delay in setting up and attending the ADR process would have been prejudicial to the client
• Whether the ADR process had a reasonable prospect of success.

Failure to provide information and advice at the appropriate stage may have costs or other consequences."